EPS

Employee Pension Scheme came into force on 16th November 1995. This scheme applies to all the employees of factories and other establishments to which the 1952 Miscellaneous Provisions Act and Employees Provident funds apply.

What is Employee Pension Scheme 1995 or EPS 95?

EPS 95, also called the Employee Pension Scheme 1995, is a type of social security scheme launched by the Employees’ Provident Fund Organisation (EPFO) on 19th November 1995.

The Employee Pension Scheme (EPS) intends to benefit employees post their retirement. The EPFO manages the administration and assists employees who have reached 58 years of age to obtain a pension.

The EPS benefits stand available for both new and existing EPF members. Here, both the employee and employer contribute 12% of the employee’s wage, including the basic salary and DA, to the scheme.

During every month, the employee's complete contribution is made to the EPF. Subsequently, 8.33% of the employer’s contribution goes to the EPS, and the remaining 3.67% goes to the EPF.

EPS 95 Pension Latest News

According to a press release issued by the Ministry of Labour & Employment on 3rd May 3rd, 2023, employees who are opting for a higher EPS pension will not be required to contribute to it.

Going forward, the additional 1.16% of the salary they would have to pay from above the wage ceiling will now be drawn from the 12% of the employer's contribution.

Note the deadline to apply for a higher pension has been extended to 26th June 2023.

As per the current pension calculation method under EPS 95, the pension will depend on the average basic salary in the last 5 years and the total length of service.

Responsibilities of Employers

Here are the key responsibilities of employers regarding pension contribution in EPF-

  1. From and out of the contributions payable by the employer in each month, a part of the contribution representing 8.33% of the employee's pay (Basic+ Dearness Allowance) shall be remitted by the employer within 15 days of the close of every month to the Employees Pension Fund.
  2. Central Government also contributes at the rate of 1.16% of the pay of the members of the Employees Pension Scheme 1995 and credits the contribution to the Employees’ Pension Fund.
  3. The principal employer must make contributions for all employees working for him directly or under a contractor.
  4. In case an employee becomes disabled totally or permanently during the service, then the employer must deposit funds in his basic EPS account for at least one month to be eligible for the pension.
  5. All administrative costs must be borne by the employer

Eligibility Criteria Applicable for EPS

  1. For availing the pension benefits under the EPS 95 Pension scheme the employee must serve a minimum of 10 years in service.
  2. The age of retirement is 58 years.
  3. Member can also withdraw his/her EPS at a reduced rate from the age of 50 years.
  4. If an employee has completed less than 10 years of service. But more than 6 months’ service, then he/she can withdraw the EPS amount on being unemployed for more than two months.
  5. If any employee becomes disabled totally and permanently, then he/she is entitled to a monthly pension irrespective of the fact that he has not served the pensionable service period and is payable for his lifetime. However, the member may have to undergo a medical examination to check whether he is unfit for the job that he was doing before becoming disabled.
  6. A member’s family also becomes eligible for Pension benefits in case of the death of the member while in service.

How to Calculate Your Pension Under EPS

The pension amount in PF depends on the pensionable salary and the pensionable service of the member.

Formula to Calculate Member’s Monthly Pension Income is-

Member’s Monthly Pension = (Pensionable salary x Pensionable Service)/70

a) Pensionable Salary

The average monthly salary withdrawn by the member in the last 12 months before exiting the Employee Pension Scheme in India is the pensionable salary.

If there are non-contributory periods in the last 12 months of the employment, the non-contributory days in the month will not be considered, and the benefit of those days will be given to the employee.

For ex-If the salary of the person is ₹ 15,000, and he joins the organization on the 3rd of the month, then the salary for that month would be ₹ 14,000 for 28 days (₹ 500 per day less for two days). However, the consideration for monthly EPS salary would be for 30 days, i.e. ₹ 15,000. So, the amount which has to be deposited in the EPS account of the employee would be 8.33% of ₹ 15000 = ₹ 1250

The maximum pensionable salary has been increased from ₹ 6500 to ₹ 15,000 every month.

b) Pensionable Service

Pensionable Service is the actual service period of an employee or member.

The pensionable Service Period is calculated by adding all the services rendered by the member to different employers as well.

Every time an employee switches jobs needs to submit EPS Scheme certificate issued to him to a new employer.

The employee has to get the EPS Scheme Certificate issued and submit it to the new employer every time he switches a job.

It is important to note that the employee gets a bonus of 2 years after completing 20 years of service.

Before completing the service period of 10 years, if the member withdraws the EPS corpus and joins another company, he will have to start afresh by contributing to the basic EPS account, and he/she has to start fresh as the service period will also be set as zero at the start.

The consideration of the pensionable service period is on a 6 months basis. The minimum pensionable service period is 6 months. The pensionable service period considered is 8 years, if the service period is 8 years 2 months, however, the pensionable service period is taken as 9 years if the service duration is 8 years and 10 months,

Types of Pensions under the Employees’ Pension Scheme

There are different types of pensions under EPS 95 pension scheme, such as pensions for widows, children, and orphans, which support the family members of the pension.

1) Widow Pension

Under the Widow pension or Vridha pension, the widow of the member is eligible for a pension. The pension amount will be payable until the death of the widow or her remarriage. In case of more than one widow, the pension amount will be payable to the eldest widow.

2) Child Pension

The surviving children of the family, in addition to monthly Widow Pension, are eligible for child pension in case of the member's death. The monthly pension will be paid till the child attains the age of 25 years. The payable amount is 25% of the widow pension, and to a maximum of two children amount can be paid.

3) Orphan Pension

Children of the member will be entitled to get the monthly orphan pension of 75% of the value of the monthly widow pension in case the member dies and has no surviving widow, his. From oldest to youngest, two surviving children will be benefited under the orphan pension.

4) Reduced Pension

A member of the EPFO can withdraw an early pension if he has completed 10 years of service and has reached the age of 50 years but is less than 58 years. In this case, the age is less than 58 years at a rate of 4% for every year the pension amount is slashed.

In case the member decides to withdraw the monthly reduced pension at the age of 54 years, he will get the pension at a rate of 84% (100% – 4 x4) of the original pension amount.

Types of Pensions Forms under EPS in India

In order to avail of the benefits of the employee pension scheme, the following form needs to be filled by the member. Or the survivors of EPFO Members.

EPS Form Applicant Purpose of the Form
Form 10C Member
  • Withdrawal before 10 years of service
  • EPS Scheme Certificate
Form 10D Member
  • Monthly pension withdrawal after 50 years of age
  • Monthly widow pension, child pension, etc.
Life Certificate Pensioner/Guardian
  • The pensioner signs a form certifying that he/she is alive.
  • Every year in November, when the pension account is active, the form needs to be submitted to the bank manager.
Non-Remarriage Certificate Widow/widower
  • To declare that the widow/widower has not remarried
  • It has to be submitted every year in November

Benefits of Employee Pension Scheme 

The significant EPS benefits are as follows-

  • It offers a fixed income after retirement at the age of 58 years or after early retirement at 50 years.

  • It provides a monthly pension to the members who have become disabled totally/permanently, even after not being able to serve the pensionable service period.
  • It permits to withdraw the complete sum of the pension at the age of 58 years if he/she leaves service 10 years prior to turning 58 years of age. 
  • It provides the pension amount to the member’s family if the member, unfortunately, dies before or after the pensionable service period.

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